INSIGHTS

Duncan Donald

Thu, Dec 31


A year to forget - Yet we enter the new year with the Stock Market buoyant

When we look back in history at the year that was 2020 we can hope that it is with enormous relief that the world has healed and the pandemic is behind us.  In a year like no other we have seen a depth of economic and social struggles not generally felt outside war times. However thanks to the promise of innovative medical developments and vaccination we hope an end is in sight.  This week has brought the death toll of the virus to 1.8 million and growing at an alarming rate, with cases growing and infection reemerging in countries that had hoped Covid-19 was behind them.  Despite this global stocks continue to push intent on ending the trading year at record highs in some cases. 

 

With stocks aided by lower interest rates investors intent on yield hunting have come back into the stock market, with cyclicals not dragging too much volume from the stay at homes and tech wch have enjoyed a huge bull run since spring this year.  In the US despite the House of Representatives passing the stimulus deal earlier in the week it still awaits Senate approval thanks to a late intervention from the ailing Donald Trump as he still clings on to the reigns of power. It is believed his team is making the transition of power extremely difficult for the incoming President Elect Joe Biden.  Next week's Georgia runoffs will likely prove to be the final confirmation of the departure of power for Trump, but key focus will be on the strength of the victory for the Democrats and the power this gives them in the Senate. 

 

In the UK it was a momentous week with today being the last day as a formal EU member. Whether this proves to be the right or wrong decision remains to be seen but the fact there was some form of deal has proven solid footing for the Pound as it closes in on 1.3700 versus the US Dollar. The UK Prime Minister achieved the backing of Parliament grudgingly as opposition Labour leader Keir Starmer was forced to agree that some deal was better than No-deal. Whilst the Conservative party lauds this as a momentous achievement it does look from the outset that the UK may not have achieved the promises made when the UK public voted.  

 

The UK is still making the headlines for the wrong reasons in the battle with the virus with nearly 1000 deaths registered and 47,000 new cases yesterday. With new lockdowns bringing virtually all of the UK to the elevated levels of restriction  the damage to the economy lingers into the new year. Despite this fact, soaring stocks across the globe and weaker US Dollar the Pound and FTSE remains in demand having spent the last 4 years perhaps underweight amongst the investment community. Whilst we don't expect the first few months of the new year to be politically or economically strong for the UK there could well be interest from the longer ended investment community to catch the long term train of recovery and return. 

 

As we close on a year we look to forget we must draw comfort for the ultimate hope the vaccines have brought and hope there are no issues with deliverable issuance and health implications brought from its distribution. Let's hope for a more healthy and prosperous new year!

 

Happy New Year and all the best for the year 2021!

 

 

The Week Ahead:

 

Monday - The new year starts with a day of Manufacturing  PMI data starting in Japan before Spain, Switzerland, Italy, France, Germany, UK, Canada and the US. Additionally we get UK Mortgage data and US Construction Spending data as well as news from the OPEC JMMC meeting in the afternoon. 

 

Tuesday - In the European session we get German Retail Sales and Unemployment data as well as French CPI and Eurozone Money Supply data. In the US session its ISM Manufacturing PMI data. 

 

Wednesday - It's a day of Services  PMI data starting in Japan before Spain, Switzerland, Italy, France, Germany, UK and the US. Additionally we get German CPI and Spanish Unemployment as well as ADP Employment and Factory Orders from the US as well as the FOMC Meeting Minutes in the evening. 

 

Thursday - Australian Trade Balance and Building Approvals starts the day.  Before German Factory Orders and UK Construction PMI.  Eurozone and Italian  CPI Flash Estimates come mid morning as well as Eurozone Retail Sales. In the US session we get Canadian Trade Balance US Unemployment Claims and ISM Services PMI. 

 

Friday - From Germany we get Industrial Production and Trade Balance before French Trade Balance Consumer Spending and Industrial Production. Late in the morning we get Unemployment data from Italy and the broader Eurozone. In the US session we get US and Canadian monthly Employment data and Average Earnings from the States. 

 




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